I was inspired to read Robert B. Reich's latest book Supercapitalism: The Transformation of Business, Democracy, and Everyday Life after seeing him numerous times on shows such as The Rachel Maddow Show and Countdown with Keith Olbermann this past month or so. His insights on economic issues are invaluable and usually spot on. I have long admired Reich, who was one of the few genuinely liberal voices in the more moderate Clinton Administration, and perhaps the best, most effective Secretary of Labor in the post World War II era.
In Reich's latest book (though not really "new" as it has been out for a little over a year) he analyzes the origins of our highly competitve and globalized economy and its consequences for us as consumers, investors, and citizens. According to Reich, technological changes in the late 1960s and early 1970s transformed our economy from one that was dominated by large oligopolistic corporations producing goods in large volume at relatively low per-unit costs (raking in the benefits of economies of scale), free from foreign competition and having the ability to work with industry-wide labor unions to offer high wages and benefits. Companies were relatively "good" to their employees because they could more or less afford to be. Increased competition called for MASSIVE cost cutting. The shift in technology (technological improvements made possible by massive research & development investments during the Cold War era) made our "democratic capitalism" much more competitive and globalized. These improved technologies not only eroded this social-economic structure (Reich aptly calls it the "Not Quite Golden Age"), it also paved the way for investors to aggregate their savings in giant mutual funds and demand higher returns on their investments. So not only were the firms that were subject to foreign competition affected with cutting costs, but companies (mostly service-sector) that were thought to be exempt from foreign competition now faced demands to lower costs and maintain a lofty bottom line. As Reich flatly states in a somewhat understated fashion: "Power shifted to consumers and investors. Supercapitalism replaced democratic capitalism."
Now there is MUCH to agree with Reich as far as how the economy shifted in the early 1970s to where we are today, but I do have a minor quibble with his analysis: He seems to REVERSE cause and effect. He seems to exempt politcal factors (or believes that political changes came AFTER the technological ones) in the economic transformations that have led to increased inequality, damaging deregulations, union busting/suppression, environmental degradation, etc. Reich lets WAY TOO MANY people off the hook, namely the people who funded the right-wing think tanks that peddled deregulation and tax cuts, anti-unionism, privatization, and other free martket fundamentalisms in the 1970s and other aspects of what we now refer to as the "right-wing noise machine". This is a huge political aspect that I feel is largely underplayed (if not outright dismissed) by Reich. Even if technological change was the sole factor in transforming our economy, there is still a POLITICAL angle that needs to be acknowledged. I mean WHO decides what technologies will be pursued or how they are implemented. Will technology benefit workers, make their jobs safe, increase their productivity and allow them to enjoy the fruits of any productivity increases or will technology lead to increased inequality, stagnant wages, speed-ups on the line, "big brother"-esque monitoring of employees down to the very number of keystrokes, outsourcing, etc. The answers to these questions are largely POLITICAL ones, and it should come as no surprise as to who really holds political power and what direction technology has led us.
It is undoubtedly true, as Reich asserts, that we as consumers and investors are reaping the benefits of the highly competitive supercapitalism via lower prices and higher returns on investments. It is also true that we as CITIZENS have NOT benefitted as well as our democratic republic is overwhelmed by the not so coincidential rise in corporate lobbyists and the seemingly ubiquitous influence of money on our demcratic process. This is another area where I have a quibble with Reich. Reich claims that the increased influence of lobbyists and corporate donations are more or less a simple question of corporations that are under huge competitive stress trying to gain a "competitive advantage" against other corporations experiencing similar pressures of competition. Although this is correct in and of itself, it is not the ONLY reason. It should be viewed as no small coincidence that corporate power has risen at the expense or NEARLY EVERYTHING ELSE, not just against OTHER corporations. There is a sort of "childlike innocence" by Reich in the chapter describing the awesome corporate influence over our government. Someone like Reich might believe this power to be a relatively benign force used to gain competitive advantage in order to get their customers lower prices and their shareholders better returns, but someone of a more Institutionalist or Marxian bent might see this confluence of corporate and political power and say "No SH#T, Sherlock!!!".
Of course, even if Reich's analysis is a little lacking on the political aspects, he is a solid liberal who, in spite of my criticisms, is in NO WAY justifying any of these negative consequences of increased competition, and is in fact troubled by them. His solution, when all is said and done, is a simple one (and quite correct): "Genuine reform will occur only if and when most citizens demand it". One of the strongest portions of the book is pointing out how our politics are diverted towards the uttlery bogus, useless, public-relations propaganda of "corporate social responsibility" and how this has served as a POOR substitute for a genuine democratic process. According to Reich, it is in our democratic sphere where these issues should be hammered out, a democratic sphere run by REAL citizens and free from "anthropomorphic" corporations. It is in our democratic process where the "true costs" of supercapitalism that aren't relected in the marketplace can be dealt with.
Despite my criticisms (after all, I am just a lowly economics grad school dropout with some extra time on my hands), this is a fine book that describes the massive transformation of our economy and its consequences. Unlike most of the economics profession, he recognizes that there are problems that go beyond more tax cuts and more deregulation. We ignore Reich at our own peril. This is a must read, even if it is flawed, for anyone of a left of center politcal bent interested in political and economic issues.